Chapter 70 changes may alter Ayer-Shirley's school budget

SHIRLEY -- Recent changes in the formula for communities' required local contributions could dramatically alter the budget for the Ayer-Shirley Regional School District and the two towns.

Ayer-Shirley Superintendent Carl Mock told the School Committee Wednesday night that the state's new formula, designed to finish the Chapter 70 equity reforms of 2007, changes everything.

"We are looking at cuts that would be catastrophic," he said.

The RLC is a minimum amount that cities and towns must contribute to their school districts. In fiscal 2007, Ayer's RLC was nearly $1 million higher than the Department of Elementary and Secondary Education's target figure. In each successive year, Ayer narrowed the gap between its RLC and the state target to the point that, in fiscal 2014, it will be eliminated. In fiscal 2014, Ayer's RLC will be equal to the state's target figure of $6,733,265.

By contrast, Shirley's fiscal 2007 RLC was nearly $500,000 less than the DESE's target figure. Although the gap has narrowed between the two figures over the past six years, Shirley's fiscal 2014 RLC is still projected to be $202,963 below the DESE target of $4,825,554.

The RLC is a measure of how much local tax revenue a city or town can reasonably raise and dedicate to the operation of its schools. For fiscal 2014, the new state formula means that the assessment for Shirley will increase by $260,699, "and when that occurs, it also changes net school spending above the local contribution," stated Mock.

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Ayer's RLC lower by $8,651 from the current year.

Although Ayer Shirley is a regional school district, across the state, Chapter 70 funding is looked at locally, ASRSD Finance Director Evan Katz said.

"The RLC piece is problematic, because with net school spending above the RLC, for every dollar Shirley contributes, Ayer contributes two. But in RLC there is no match, so it raises on a dollar-for-dollar basis."

For Shirley, an RLC increase of $260,699 that brings no match from Ayer is a big chunk of revenue for Shirley, Katz said.

In addition, if a town is not "at zero" in terms of its meeting the DESE target for RLC, the state "takes a chunk each year. This is catch-up for communities that the state feels need to ratchet up their contributions a little more."

"We will still be lagging in the next couple of years," said Mock, adding that the town's ability to raise funds is about $300,000, obviously not enough to fill the need.

Mock said that he and others had been discussing getting relief from the state on two issues. One is that the region is new and that the money for its transition was inadequate. In its transition year, the district operated on a $300,000 grant.

Secondly, said Mock, one community is doing catch-up on RLC and on the above-RLC phase-in, and the community has limited taxing ability. Next year, Shirley will pay 32 percent of NSS costs above the RLC, up from 24 percent in fiscal 2012, and 28 percent in fiscal 2013. In the next three years, the phase-in will continue to be about a 45 percent share.

"I think we have to, one, start having conversations about the impact of this huge limiting factor on our resources. It is an extraordinary limiting factor."

Mock suggested having the district's leadership board meet with local legislators. "Just to give you an idea of the impact of this, if you took the $300,000 full taxing authority of Shirley, we would still have to cut this budget by $800,000, and we are already running a half-a-million-dollar deficit due to special-education costs.

"This is a pretty traumatic change we had not anticipated."

Katz said that in the past, there had been a $1 million to $5 million "pothole" fund to address unique situations like this, and that there was an application process with criteria. Formally known as the Foundation Reserve Award, the pothole program was established by the Legislature in 1996 to supplement Chapter 70 funding and provide relief for extraordinary and unanticipated needs.

"But the pothole fund doesn't appear to exist right now," he said.

When School Committee member Susan Therriault asked if the situation were dependent upon the governor's budget, Katz replied that the local aid amount is in the state budget, and that the budget "blesses the formula they use." But, he added, "It can be changed."

"If the governor's budget holds true, we would essentially have no more revenue for two years," said Mock. "We're looking at something where we are making $8,000 more in revenue next year than this year, which is no more than last year. Everything is being made up on the assessment side. There is no place else to go."

"I definitely think we should engage our legislators. I think that is the best route, but I think they are pretty limited in what they can do," Therriault stated.

"It would have to be approved by the Legislature," said Katz.

"If Shirley were to get some kind of legislative relief, would that mean that Ayer would pay more?" asked Shirley Finance Committee Chair Frank Kolarik.

"It depends on the formula used. If Shirley's RLC goes down, then with all the expenses shared two-to-one (Ayer/Shirley), that would help the region," said Katz.

"That would begin to approach (the preliminary budget) we presented on Jan. 8," Mock added.

"We also need a long-term solution, because this isn't going to go away," said Therriault.

"This is a situation where time really isn't on our side because we have a budget to certify and the House doesn't generally vote until the end of April, after we have certified our budget, so we have a pretty narrow window if we have to go forward with something this spring," Katz explained. "The Senate acts in May and does not reconcile until June, and that's obviously very late for us to do any realistic planning."

The School Committee is required to certify the school budget in March, he said.

The panel will meet with the Shirley Finance Committee on Monday night, after which they plan to have a meeting with the two town boards of selectmen and finance committees.

Kolarik said he expects the town accountant to have the town's free cash estimates by then.

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